MUMBAI: Faced with a bleak demand environment in recruitment, especially from the IT sector, internet-based recruitment company Info Edge, proprietor of the popular website Naukri.com, is going slow on some of its strategic initiatives.
The company admitted the demand is low from its IT sector clients. Ambarish Raghuvanshi, chief financial officer, Info Edge, said the demand for recruitment from its clients was weaker compared with that in last fiscal.
"In general, the reduction in demand may be 20% but if you consider IT sector specifically, then the demand is lower by 30%," he said.
Ankit Kedia of Centrum Broking, in his report on Info Edge this month, said, "We reiterate our reduced rating on the stock on the back of a challenging macro environment that is posing challenges to the demand environment for both IT and non-IT clients." While trade body Nasscom has predicted a 6% dip in growth for the IT industry this fiscal, companies such as Infosys, Satyam, TCS, Wipro have reduced fresh recruitments by an average of 30% against last fiscal.
Info Edge would go slow on acquisitions for now and focus on investing in "promising India-centric, internet-driven profitable start-ups", said Raghuvanshi.
Analysts observe that Info Edge management has not been able to identify an acquisition target that it regards as a strategic fit to its portfolio, even though valuations have become cheap.
"The management plans to utilise excess money by investing Rs 120-150 crore in 8-12 start-ups over the next one year which will mature over a period of 3-5 years. We believe the Rs 650-crore investment for a 40% stake in Applect Learning Systems and $1 million in US-based Study Places Inc is just the beginning," Kedia said in the report. The company is optimistic as "in the last year, visitor traffic on its various websites has increased from 45% to 60%," said Raghuvanshi.
Info Edge posted a revenue growth of 55% in FY08 over the previous fiscal. In the first quarter of FY09,it posted a revenue growth of 36% year-on-year, in line with its expectations. But the cautious approach will go on for some more time, at least for another three quarters. Raghuvanshi said, "By then we will be able to get a clearer picture of the slowdown in western markets that is making our IT sector clients cut down on recruitment."
